Treasury proposes 5% spending cut to tame deficit

Minister of Finance Bezalel Smotrich credit: Danny Shem Tov Knesset Spokesperson
Minister of Finance Bezalel Smotrich credit: Danny Shem Tov Knesset Spokesperson

The across-the-board cut in ministries' budgets for 2025 is one of a series of measures aimed at restricting the fiscal deficit to 3.8% of GDP next year.

Sources inform "Globes" that at a meeting at the Ministry of Finance headed by Minister of Finance yesterday, part of a series of discussions on the 2025 state budget, the main proposal raised was for a 5% across-the-board cut in the budgets of government ministries, amounting to NIS 3.5 billion in total.

This is one of several measure proposed by the ministry’s Budgets Division designed bring the expected fiscal deficit for next year down to 3.8% of GDP. The Budgets Division has formulated a bank of possible adjustments amounting to a total of NIS 50 billion.

Among the other proposals raised: a pay cut for senior managers in the public sector; postponement of the next instalment of the pay rise in the civil service; a cut of NIS 2-4 billion in allocations to coalition parties; abolition of unnecessary government ministries; and other efficiency measures in the public service. It was also proposed that the VAT rate should be raised to 19% (it is already due to rise from its current rate of 17% to 18%), but such a step will probably be kept in reserve in case the exchanges of fire on Israel’s northern border escalate into all-out war, requiring immediate sources of finance.

According to the Ministry of Finance’s calculations, without adjustments, the fiscal deficit is liable to reach 6.2% of GDP in 2025, given additional spending on defense of NIS 20 billion. To reach the 3.8% target, the deficit will have to be trimmed by 2.4% of GDP, that is, by NIS 50 billion.

The idea was also raised of another attempt to cut the tax benefit on advanced training funds, which are in effect a tax-free savings scheme, despite the political difficulties of such a step vis-à-vis the Histadrut (General Federation of Labor in Israel), which has blocked such attempts in the past. To reconcile the Histadrut to such a measure, the government will first of all have to demonstrate a commitment to making cuts within itself.

Within the next few days, Smotrich is expected to decide on the deficit target, after internal consultations and perhaps consultations with Prime Minister Benjamin Netanyahu as well. The Ministry of Finance will then carry out the staff work to select the adjustment measures that will be introduced into the budget, in coordination with the other government ministries, to plan the specific spending cuts at each of them.

Published by Globes, Israel business news - en.globes.co.il - on June 20, 2024.

© Copyright of Globes Publisher Itonut (1983) Ltd., 2024.

Minister of Finance Bezalel Smotrich credit: Danny Shem Tov Knesset Spokesperson
Minister of Finance Bezalel Smotrich credit: Danny Shem Tov Knesset Spokesperson
Unframe founders credit: Yossi Yarom Israeli AI enterprise platform co Unframe raises $50m

Unframe’s turnkey AI solutions enable companies to solve any enterprise AI use case at scale with fully functional, customized AI solutions for businesses in a matter of hours, rather than months.

Combatica credit: Combatica Combatica launches next-gen VR AI training platform

The Israeli company's virtual reality platform includes 50 AI generated scenarios, seven maps and even situations for operating night vision.

Shekel credit: Shutterstock Vladirina 32 Shekel volatility after US tariffs announcement

The shekel is weakening sharply against the euro, which is gaining following the unveiling of Donald Trump's tariffs plan.

Minister of Finance Bezalel Smotrich credit: Noam Moskovitz Knesset Spokesperson Treasury assesses potential damage to Israel's US exports

Israel will be charged a higher tariff on its exports to the US - its biggest export customer - than Turkey and the UAE.

Iranian flag credit: Shutterstock Why inflation haunts Iran

With a month-on-month increase of 3.3% and an annual rate of 37.1%, inflation reflects the struggles of millions of Iranians.

APM merges with lawyers from Doron, Tikotzky Kantor, Gutman credit: Eyal Merilos APM merges with 12 lawyers from Doron, Tikotzky Kantor, Gutman

With the addition of these 12 lawyers, Amit Pollak Matalon & Co. will now have 135 lawyers.

US President Donald Trump credit: Reuters Sipa USA Israel on list as Trump unveils tariffs

Relatively low reciprocal tariffs will be imposed on Israeli goods sold in the US.

Deflated unicorn credit: Shutterstock Big Tech 50 reports more huge falls in startup valuations

Israeli R&D partnership Big Tech 50 reports that an investment of $2 million in Orcam made in 2021, shrank to just $31,000 at the end of 2024.

NextFerm technologies based on yeast credit: NextFerm Food-tech co NextFerm suspends operations

The company, which produces food ingredients in yeast without genetic engineering, cannot pay its debts and is seeking a buyer.

Minister of Finance Bezalel Smotrich credit: Shlomi Yosef OECD sees recovery in growth but high inflation

The OECD Israel Economic Survey 2025 recommends that the Israeli government take several restraining measures, in order to exit the economic storm created by the war.

Dano Ben-Hur credit: Dror Sithakol Statisticians contradict BoI on impact of housing finance deals

The Central Bureau of Statistics insists the impact of 20/80 buy now pay later financing deals on the real estate market and housing prices is minimal.

Governor of the Bank of Israel Amir Yaron  credit: Government Press Office Debt fears top Bank of Israel's concerns

Most unusually, Governor of the Bank of Israel Amir Yaron's press conference last week did not focus on inflation and the impending interest rate decision.

US President Donald Trump  credit: Reuters/Leah Millis Israel moves to avoid Trump's tariffs axe

Minister of Finance Bezalel Smotrich has signed an order canceling all tariffs on imports from the US. The impact will mostly be on agricultural produce.

Forbes Rich List credit: Shutterstock Maslowski Marcin Wiz founders ranked in Forbes 2025 Rich List

There are a few dozen Israelis listed in the 2025 Forbes Real-Time Billionaires List including Wiz founders Assaf Rappaport, Yinon Costica, Roy Reznik and Ami Luttwak.

SatixFy CEO Nir Barkan credit: Ariel Barkan Canada's MDA Space to buy Israeli satcom co SatixFy

MDA Space will pay $269 million for the Israeli company, including taking on a $76 million debt and a 75% premium on SatixFy's closing price on Nasdaq yesterday.

Raising dollars credit: Shutterstock Israeli startups raised over $1b in March

Israeli privately-held tech companies have raised $2.1 billion in the first three months of 2025, according to IVC-LeumiTech, up 24% from the corresponding quarter of 2024.

Twitter Facebook Linkedin RSS Newsletters גלובס Israel Business Conference 2018